Looking Into The Future 


Address By 


B. A. WORTHINGTON, 
President Chicago & Alton R. R 


At the Annual Dinner of the 
American Railway Engineering Association 


Congress Hotel, Chicago, March 19, 1913 





Looking Into The Future 


It is needless for me to say that I fully appreciate the 
high honor of addressing your association at its annual ban- 
quet; but it is with some degree of hesitancy that I assume 
to appear before a body of professional men whose funda- 
mental requirement in order to qualify in their calling is 
a most liberal technical education; gentlemen who, I might 
say, represent the culture and aristocracy of the railroad 
profession; and I might also say with sincere candor, gen- 
tlemen who, as we all know, represent the only branch of 
railroad service where the rules and practices are based 
upon exact science. Of course, I will admit that sometimes 
a premise may be wrong, but the conclusions of our engi- 
neers are always based upon sound formulae—or empirical 
deduction. 

With the permission of the chairman of your entertain- 
ment committee, I have selected for the subject of my ad- 
dress “Looking into the Future,’ and with your kind indul- 
gence, I shall take as my text an article appearing in the 
March issue of the World’s Work, entitled “What I Am Try- 
ing to Do,’ by the Honorable Franklin K. Lane, late chair- 
man of the Interstate Commerce Commission, recently ap- 
pointed Secretary of the Interior, in which article Mr. Lane 
says: “We are seven, but we work as. one.” 

In the concluding paragraph he states: 

“The men who actually operate our railroads, who keep the 
intricate wheels of this mighty machine constantly in mo- 
tion and always at our service, receive too little public ac- 
knowledgment for the work they perform. They are among 
the most skilled, capable and honest of our business and 
professional men. They have an enthusiasm in their work 
and a loyalty to their companies that is a constant satis- 
faction, and their delinquencies too often may be traced to 
policies which purely as railroad men they would not coun- 
tenance. With these men we can work, and through them 
‘we may hope for the realization of a national system of rail- 
roads that will be fair as to rates, profitable as to income, 
and adequate as to service.” 

As many of you know, I am a native son of the Golden 
West, having been born and raised in California, and I have 
had the honor of a personal acquaintance with Mr. Lane 
for over a quarter of a century. While he was once an 
earnest advocate of government ownership of the railroads, 
in the fifth paragraph of the article above mentioned he says: 

“Our primary object must be to prove the efficacy of the 
machinery devised by law for bringing the policy of our 
railroads into conformity with the policy of the law—to 
make private capital serve public need and yet conserve the 
interest of the railroad owner. The public wish the best of 
service at the lowest possible rates; the owners desire the 
highest return consonant with the fulfillment of their un- 
dertaken duties. This may be an impasse—a situation so 
impossible of resolution that we are destined to join those 
nations who are experimenting with governmental ownership 
and operation. That stage of despair, or of resolution—de- 
pendent upon the viewpoint—we, however, have not yet 
reached. In fact, I believe we are far from it, for we have 
only entered upon the experiment of regulation by commis- 
sion, and students of this subject from other lands have 
said that their countries would not have sought refuge in 
governmental ownership had they in time discovered the 
American method of dealing with the railroad problem.” 

Briefly reviewing the situation, taking a back sight into 
the past to establish a foresight into the future, let us sum- 
marize the known quantities with which we have to deal, 
formulate our equations and theories and project them into 
the future as best we may. ; 

Commerce is defined as the taking of things from the 
place where they are plentiful to the place where they are 
needed, and it has been well said that the degree of civiliza- 
tion enjoyed by a nation may be measured by the character 
of its transportation facilities. This is true not only of 
modern nations, but of all nations of which we have authen- 
tic history. The most advanced nation has always excelled 
in commerce and wealth, and the economic measures adopted 
for the furtherance of these interests have evolved civiliza- 
tion, which in itself is merely improvement in arts and 
llearning.: 


COMMERCE THE FORERUNNER OF CIVILIZATION. 


Among the first great nations of which we have positive 
knowledge were the Phoenicians, who for nearly two thou- 
sand years enjoyed the commercial supremacy of the world. 
Out of the necessities of their expanding commerce they 
invented numerous devices, many of which, withstanding the 
severe test of time, have been preserved for us, indispensa- 
ble to modern civilization. They invented, for instance, 
an alphabet of their own representing sounds, because the 
picture writing of their neighboring nations could not be 
adapted to the needs of commerce, and their alphabet has 
been handed down to us of today as the greatest of all in- 
ventions. Before the Phoenician alphabet came into general 
use, history is dark, save for the flickering sparks of civ- 
ilization commemorated by representations of visible ob-~- 
jects, the meaning of which so often is conjectural. 

Hach subsequent nation which has risen to prominence has 
contributed its share to civilization, but only because of the 
exigencies of commerce and that indispensable factor of com- 
merce—transportation. Wherever we may look, we shall find 
that commerce is the hand that shapes the destiny of na- 
tions, the agency which most needs and best utilizes the 
factors of civilization—art and learning. 

China, with her yet primitive transportation facilities and 
necessarily restricted commerce, is an up-to-date object lesson 
in this respect. The accredited inventors of printing and ex- 
plosives, those wonderful agencies of progress and defense, 
the principles of which have been known to the Chinese for 
over one thousand years, yet in all that long period not 
one Chinaman out of a total of three hundred million living 
population had even the faintest; conception of the value of. 
their inventions—because the spurs of commerce were un-! 
known to them, and their simple defenses were best accom- ‘ 
plished by stone walls of commercial isolation. It is of 
peculiar interest that the Chinese worship a fabled dragon, 
an object of terror, while our own forefathers worshipped 
their sacred bull, the carrier of their burdens, an emblem 
of progress. 

Within the past few years, however, China has been awak- 
ened by the shrieking locomotive and the rumbling wheels 
of commerce, the introduction of modern business facilities 
marking the end of long centuries of domestic slavery, ap- 
palling pauperism, and thieving hordes which for generations 
have thrived upon their depredations—the theory of the an- 
cient Chinese government being exploded with the gun pow- 
der of their own making. 


NEW THEORIES OF GOVERNMENT. 


In America, independence, having its birth in the mem- 
orable events which led up to the activities of the Boston 
tea party—an open rebellion against the restraints which 
England sought to impose upon American commerce—has 
advanced new theories of government. In the application 


of these theories many new conditions have been encoun- 
tered and many perplexities have arisen to tax the wisdom 
and the courage of our most learned and capable men. In 
the past we have surmounted all these obstacles because 
we have always been able to find amongst us somewhere a 
man of the hour with conviction and courage of conviction 
equal to the occasion—and we have passed through some 
crucial tests. The nation has been torn asunder, the North 
and the South have faced each other with dripping swords, 
but we have never before encountered a situation so in- 
sidious of growth and so seriously affecting the bone and 
sinew of our strength, yet so full of promise, as the rail- 
road situation of today. We-are again wintering Valley 
Forge, internal discontent and conflicting elements adding 
to the difficulties of a seemingly impossible task. Let us 
hope with Mr. Lane that with the men who will answer the 
call final results may be realized which will be fair and ade- 
quate for all. 


REBATING INEVITABLE UNDER KEENLY COMPETITIVE CONDITIONS. 


During the past half century the railroads have been de- 
veloping the resources of this country in a perfectly nat- 
ural way. That certain abuses have crept into their methods 


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is not at all surprising, for wherever active competition ex- 
_ ists we shall always find abuses of a more or less serious 


nature; and when the apparently ideal methods of small 
business are applied by a sensitive, active, alert organiza- 
tion to a pusiness having a net capitalization of $14,000,000,- 
500, relatively unimportant shortcomings are .wonderfully 
magnified and assume unusual significance. Yet during this 
period of rebating, discrimination and kindred evils, the 
wealth of the United States increased from $7,000,000,000 
in 1850 to $107,000,000,000 in 1904, $65,000,,000,000, or over 
half of this enormous wealth, having been developed during 
the last twenty-four years of this period, while the perni- 
cious practices so often referred to were under full sway. 
From this point of view the matter of rebating, etc., dwindles 
to relative insignificance, for we must bear in mind that this 


enormous wealth is substantial wealth, invested in the gilt- - 


edged securities of farm lands, city property, industrials and 
public utilities, all enhancing in value dependent entirely 
upon future development of railroads. 

But I hold no brief for the rebating system or discrimi- 
natory practices. No right-thinking railroad man in the 
country is but thankful that these days of extortion are 
passed forever. Nor do I claim that railroad business meth- 
ods or conditions are yet perfected, but in justice to the 
sensitive economic features involved, I do plead for the 
most careful premeditation, and that should doubt arise 
in regard to any features, it should be carefully hedged in 
with all the proper safeguards of public welfare, bearing in 
mind the all-important lessons of history, and that economic 
and natural laws are always superior to statutory enact- 
ments and must not be disregarded. 


MEETING CONDITIONS OF THE FUTURE. 


The railroad situation at the present time is as delicate as 
it is complex. In the decade 1890 to 1900 the volume of 
freight traffic handled by the railroads was doubled, and in 
the following decade it was doubled again—and still the end 
is not in sight. Our farms are yielding but a small pro- 


’ portion of the crops that are possible by intensive cultiva- 


tion. The density of our population is less than 31 persons 
to the square mile, while the population of the United King- 
dom is 373 and that of Belgium 660 to the square mile; and 
if we project a line into the future from the point which 
we have established in the past, we cannot misapprehend 
the further development which lies directly before us. 

* But whether the volume of business increases or whether 
it decreases are speculative conditions, alike threatening to 
the railroad situation. An increase in the volume of busi- 
ness is an absolute necessity under present conditions of 
reduced net earnings per unit of service, but to provide 
facilities to handle an increased volume of business is a 
financial impossibility unless new capital can be induced to 
enter the field of railroad investment. 

In referring to this phase of the question, Howard EI- 
liott, president of the Northern Pacific railway, a man who 
has fought his own way from the humblest ranks to this 
position of eminence, stated in a recent address that there 
should be $1,700,000,000 new capital put into the transporta- 
tion business of the United States each year for the next 
five years—a total of $8,500,000,000, or 60 per cent of the 
present calculated value of all our railroad property. This 
practically amounts to reconstruction throughout in order 
to handle the business now offered and make suitable pro- 
vision for what we know is ahead of us. This means the 
replacement of obsolete equipment, the elimination of grades, 
double-tracking, safety appliances, also innumerable non-pro- 
ductive improvements, such as the elimination of grade 
crossings, modern station facilities, etc., demanded by the 


public—in short, better and safer transportation throughout. 


The expenditure of $1,700,000,000 new capital each year 
for the next five years would not mean that the wealth of 
this country would be decreased to this extent. Far from 
It would mean that this amount of money would be 
spent for labor and materials right here at home, and every 
cent of it would revert to the people in the most satisfac- 
tory forms acceptable to them. What a glorious vision of 
prosperity this presents! 


GOVERNMENT REGULATION NOT OBJECTIONABLE. 


The original founders of our railroad systems, visionary 
though they may have been and doubtless were, could never 
have thought possible the wonderful development and the 
amazing prosperity of the past twenty years. History pre- 
sents no precedent, simply because the possibilities of trans- 
portation have never before been so thoroughly exploited. 
Neither could this development have been possible, save for 
the acute business instincts of private ownership of rail- 


_ roads and the widest freedom of individual initiative, neither 


of which could survive government ownership or government 


operation. 


Government control is not at all objectionable to the rail- 
roads; in fact, it is a necessity; and its restraining influ- 
ences are entirely wholesome. In many respects the gov- 
ernment has already produced results which the railroads 
could never hope to accomplish—such, for instance, as the 
elimination of rebating and other discriminatory practices 
inherent to active competition, all of which practically have 
been abolished from the sphere of railroad operation. 

But in paring down the claws of this alleged monster, 
the railroads—a regular Chinese dragon to those less fa- 
miliar with their economic and strategic uses, still the same 
sacred carrier of burdens and the emblems of progress that 
our ancestors worshipped forty centuries ago—they have cut 
into the quick, and until the wound heals by natural proc- 
esses, progress will be crippled. In taking away from the 
railroads the prerogative of rate making and by prescribing 
numerous restrictive conditions of operation which tend to 
reduce réVenue and increase expenses, they have taken away 
from the railroads their natural weapons of offense and de- 
fense, and have left the railroads apparently at the mercy 
of an unsympathetic public, which, laboring under grave 
misapprehension, sees nothing but misdeeds, naturally, arti- 
ficially and. oftentimes maliciously, magnified. 


RAILROAD FACILITIES INADEQUATE TO MEET REQUIREMENTS. 


Owing to this unfortunate state of affairs, the railroads 
of the United States have now reached a stage where they 
are unable to provide adequate terminal facilities where they 
are most urgently required, and where congestions recur 
annually, lasting for months at a time, regardless of the 
extreme shortage of equipment. The steadily decreasing 
margin of safety in railroad operation, amounting to sub- 
stantially 28 per cent in the past ten years, has made 
it compulsory upon the part of the railroads to cut mainte- 
nance charges, and accordingly the physical property—road- 
way and rolling stock—has in many instances been sacrificed 
co produce even these results, and visions of the future have 
become obscured by the run-down conditions of today. 


RAILROAD VS. INDUSTRIAL RETURN ON INVESTMENT, 


Turning from this unpleasant aspect, in the shadow of 
gloom which has fallen upon the railroad situation the in- 
vesting public loaks askance at the red figures in income 
account, like fire destroying property values, and turns re- 
luctantly to industrials, where obscurity seems to promise 
security, where the net return upon capital invested is more 
than twice as great as in railroads, where the public is not 
a factor to consult, and where the government is in no wise 
sponsor for results. 

That the railroads should expect to share in the general 
prosperity of their own making is not surprising—except- 
ing that the railroads yield but 5.7 per cent upon investments, 
while manufactures yield over 12 per cent, and the value of 
farm land and city property is appreciating in value so rapidly 
that comprehensive data is not available. In view of the 
risks assumed in railroad undertakings, the developments 
which they have always encouraged, and the excellent serv- 
ice which they are rendering to the public even under the 
present restrictive conditions, it would appear that more 
encouraging results should be possible along this line of 
investment, as a more substantial guaranty of public safety, 
financially and commercially. The suggestion that railroad 
investments should earn as much as investments in manu- 
factures, for instance, is not out of order, because the right 
to earn a reasonable profit upon legitimate investment is 
all that is asked for, and the improvement of railroad prop- 
erty and the enlargement of its facilities is a matter of 
urgent public necessity. This menace of financial impossi- 
bilities thrust upon the railroads should be speedily removed 
as a restraint to commerce, which, in fact, it is, and in no 
small measure. 


DIVIDENDS ON RAILROAD STOCKS. 


In the matter of dividends on railroad stocks, the im- 
pression seems to prevail that a dividend of, say, 7 or 8 per 
cent on stock would be equivalent to throwing that much 
wealth into the sea, when in fact, it would merely revert to the 
people—to the widows, orphans, business men, financial and 
endowed public institutions, where it would be reinvested 
immediately in one highly desirable form or another. Cer- 
tainly this would be no crime. It would be an economic 
condition much to be preferred to the closed shop, with 
roundhouses standing full of crippled locomotives, yards 
filled with bad-order cars, roadway neglected because of finan- 
cial stringency, and wasteful congestions prevailing—all re- 
sulting in unsatisfactory service to patrons, unsatisfactory re- 
sults for the railroad managers, and a passing of dividends 
for the shareholders. The question is who does get any 
benefit from this condition of affairs? 


RAILROAD SECURITIES HELD ABROAD. 


Another phase of this question, one which should cause 
the deepest reflection, is the fact that from 20 to 25 per 
cent of our railroad securities: are held abroad. With pri- 
vate ownership of railroads as it exists today, it is useless 
for the government to attempt to evade the responsibility 
for the depreciating values of these securities, which are 
being returned to us under protest. Our “commerce laws” 
originally were enacted for the protection of bona fide in- 
vestors in railroad securities and to prevent practices that 
could not be measured by a strict code of business justice, 
and if we would avert national dishonor, more undesirable 
than anything else that could happen, we should be ever 
conscious of this delicate situation and leave nothing what- 
ever undone to satisfy in the fullest measure our pledges of 
faith held abroad. 

The armies and navies of the world have always existed 
primarily for the protection of commerce. Relentless wars 
have been waged, and shall yet be waged, because of condi- 
tions that affect national wealth and national welfare, and 
nothing affects national wealth and national welfare as do 
conditions of commerce. 

No individual has ever knowingly sought to destroy a 
source of his income, but he will fight, and fight to the 
death, to preserve it. Nations are merely groups of indi- 
viduals, none the less sensitive and responsive to these same 
conditions, and as long as foreign capital invested in Ameri- 
can railroads yields just and satisfactory returns to the 
strong financial institutions of Europe, their dogs of war 
will ever remain chained up at home, American railroad 
securities will be our national security—not the misnomer 
they seem to be today—and the International Peace Confer- 
ences at The Hague will be merely a waste of effort so far 
as America is concerned. 

This condition of affairs is peculiar to America alone. It 
is one of our most valuable assets, the most formidable de- 
fense that any nation has ever erected. Let us not tear it 
down with our own hands. 

Moreover, we are now approaching the time when it will 
be possible to materially strengthen this position, when se- 
curities must be floated for the $8,500,000,000 which should, 
and must, be put in our transportation system within the 
next five years, and wé cannot afford to ignore the oppor- 
tunity that is*now knocking at our door. - 


JUDGE KNAPP AND COMMISSIONERS LANE AND PROUTY AGREE. 


In this tangled web of conflicting conditions now lying 
before us, I believe that the ends have finally been gotten 
together. I believe the crisis is passed—even perhaps as our 
eminent authority, Mr. Lane, expresses the thought respect- 
ing government ownership: “That stage of despair, or reso- 
lution, we have not yet reached.” 

In his fine, deliberate, cautious manner, possibly the ques- 
tion of government ownership and operation of our rail- 
roads may have slipped by unobserved and into oblivion 
with the changing of his own attitude upon this point. Let 
us hope that it has. 

In the beginning of his article to which I have referred, 
Mr. Lane states in regard to the personnel of the Commission: 

“Tt would be hard to find seven men who differ more in 
temperament, in training, or in type of mind, than the pres- 
ent commissioners. We differ as one leaf from another in 
our political sympathies. Often we do not arrive at our 
conclusions from the same strategic angle.” 

Yet it is worthy of note that Mr. Lane’s predecessor, the 
Honorable Charles A. Prouty, ex-chairman of the Interstate 
Commerce Commission, a man who, like Mr. Lane, has made 
a life-long study of the perplexing railroad problems, has 
stated: 

“Tf the time does come when railroad property is sacri- 
fied to public clamor, when the public demands its confisca- 
tion and the regulating tribunal concedes that demand, no 
property will be of much value. The day will have come 
when the obligation of private rights is no longer observed.” 














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The Honorable Martin A. Knapp, likewise an ex-chairman 


of the Interstate Commerce Commission, a tireless student 
of the railroad situation, and one of the most profound 


thinkers in this country, expresses his thoughts as follows: — 


“T should regret to see the government take up the busi- 
ness of owning and operating our railroad lines.” Rs 

It would, therefore, seem that these three able analysts, 
individually and by different methods, have arrived at about 
the same conclusion—that the square of commercial condi- 
tion cannot be made to fit satisfactorily into a theoretically 
perfect circle of public ownership. 

When this question is finally and definitely disposed of, 
we may proceed more understandingly and along more sci- 
entific lines to pursue the cause of higher civilization. 


RAILROAD MEN MAY BE RELIED UPON TO AID COMMISSION. 


The clarifying of the railroad situation may yet take years 
to accomplish, for it must necessarily be a slow and care- 
ful procedure; and in the efforts of the commission to un- 
tangle this web of misunderstanding and misdirected efforts 
no right-thinking railroad man, no public-spirited man, what- 
ever may be his calling, should withhold his fullest support 
and his warmest encouragement. The railroads, having 
nothing to fear, I am sure will, as a unit, welcome and 
enthusiastically embrace the opportunity to work in full har- 
mony with the commission and for the common cause of 
the people, including not only patrons of railroads and rail- 
road employes, but also the holders of railroad securities and 
the public generally—a happy solution which in itself will 
contain all that is desirable in government ownership or 
operation, and yet will maintain the constitutional rights 
of private property and preserve the spirit of industrial 


freedom and the incentive for individual initiative which 


in the past twenty-four years have wrought a stupendous 
wealth, regardless of all our shortcomings. 


LOOKING INTO THE FUTURE. 


fhat we are nearing a satisfactory solution of this en- ~ 


tire railroad problem, I am convinced. The fact is clearly 
demonstrated by the three opinions herein cited, those of 
the three ex-chairmen of the Interstate Commerce Commis- 
sion, each arrived at entirely independently of the others 
and very probably from entirely different strategic angles. 

Furthermore, in stating his views before the Traffic Club, 
of Pittsburgh less than a year Sgo, the Honorable Charles A; 
Prouty used the following language: : 

“No form of investment today is, and no form of invest- 
ment in the future will be, more certain than railroad stocks 
and bonds. The worst that could happen to the 
stockholder of any of our great railway systems would be 
a temporary suspension of dividends, and even this could 
occur only under very unusual circumstances.” 

In view of the unanimity of opinion and the unqualified 
assurances emanating from an undisputed authority, the 
Interstate Commerce Commission, I feel confident that the 
reins of the situation are in careful hands and that we will 
yet be able to demonstrate the truth of the assertion that 
“the degree of civilization enjoyed by a nation IS meas- 
ured by the character of its transportation facilities.” 

Therefore, with a full knowledge of what we are trying 
to do, conscious of the tremendous task before us, and the 
wonderful possibilities that are contingent upon the correct 
solution of the present-day railroad problem, now is not the 
time to lament what has happened, or what may have hap- 
pened in the past, but with unwavering faith in the wisdom 
and integrity of our able Interstate Commerce Commission- 
ers, generals of the greatest army that ever entered a field 
of conquest, let us set about to build our bridges into the 
future—bridges big enough to span any depression which 
we might encounter in the commercial conditions before 
us, bridges strong enough to withstand the test of prosperity 
which we have already sighted over the established points 
of the past. 


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